SERVICE AMENDS NO-RULING AREAS RELATING TO TAX-EXEMPT GOVERNMENTAL OBLIGATIONS.

Rev. Proc. 88-26

SECTION 1. PURPOSE

This revenue procedure modifies section 4.01, paragraphs 4 and 7, of Rev. Proc. 88-3, 1988-1 I.R.B. 29, relating to areas under section 103 of the Code for which rulings will not ordinarily be issued by the Internal Revenue Service.

SEC. 2 BACKGROUND

Section 4 of Rev. Proc. 88-3 is titled "Areas in Which Rulings or Determination Letters Will Not Ordinarily Be Issued." Paragraph 4 and 7 of section 4.01 are updated to reflect nonsubstantive changes resulting from the enactment of the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B. 519.

SEC. 3 PROCEDURE

01 Rev. Proc. 88-3 is updated by deleting paragraph 4 of section 4.01 and substituting in its place the following new paragraph:

4. Section 103. -- Interest on State and Local Bonds. -- Whether the interest on state and local bonds will be excludable from gross income under section 103(a) of the Internal Revenue Code if the proceeds of issues of bonds (other than advance refunding issues) are placed in escrow or otherwise not expended for a governmental purpose for an extended period of time even though the proceeds are invested at a yield that will not exceed the yield on the state and local bonds prior to their expenditure.

02 Rev. Proc. 88-3 is updated by deleting paragraph 7 of section 4.01 and substituting in its place the following new paragraph:

7. Section 148. -- Arbitrage. -- Whether amounts received as proceeds from the sale of municipal bond financed property and pledged to the payment of debt service or pledged as collateral for the municipal bond issue are sinking fund proceeds within the meaning of section 1.103-13(g) of the Income Tax Regulations (issued under former section 103(c) of the Code) or replaced proceeds described in section 148(a)(2) of the Code (or former section 103(c)(2)(B).

SEC. 4. EFFECTIVE DATE

This revenue procedure is effective May 31, 1988, the date of publication of this revenue procedure in the Internal Revenue Bulletin.

SEC. 5. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 88-3 is modified.